The year that was 2012 in Melbourne's $1 million-plus property market

Overall we feel the market in Melbourne's inner east has finished very strongly and on a positive note for 2012. By the bay is a different story, more positive than 2011, but not as strong as the inner east.

Year starts tentatively

After 2011 finished with a whimper, the market mood from buyers, sellers and agents in early February 2012 was fairly sombre. There was a feeling that things were not going to go well this year, and this was reflected in the lack of quality homes on the market, the lack of buyers willing to push past anything remotely heavy price-wise, and a number of fringe agents considering alternative professions.

The first test for 2012 was on February 25. The mood was actually more positive than it might have been, given the negativity around. Homes were selling, but they were mostly the well-priced A-graders in the early to mid-$1 million segment, where buying and selling wasn’t about a discretionary desire, but a physical or financial need.

One area that did live up to the sense of doom and the gloom in this early part of the season was the $3 million market, the top end. It was as dead as doornail in the inner east. And while bayside had a little oomph over $3 million, it wasn’t travelling particularly well either.

Sizzling super Saturday

But the big story was about super Saturday, October 27. More than 150 $1 million-plus auctions were slated for this day – the end of a clear four-week period after the footy finals. This was the big test – and by our standards it was a sizzler. Clearance rates were up over 70%, Bidderman (the average number of bidders at every $1 million-plus auction on the day) was at 1.8 and, of the 42 auctions we attended, seven were ‘volcanoes’ with four or more bidders. That was a significant improvement on the equivalent super Saturday last year (October 22, 2011), which had a clearance rate of just 43% and a Bidderman rate of just 1.3.

Then, following the Cup weekend, this optimism seemed to take a bit of a stumble. The stats didn’t look too bad, with clearance rates in the mid 60%, and Bidderman at around 1.5. But the market felt quieter than it should have been given the great run up. Deals were still happening but not at the same level of excitement as October and, as another November week passed, some in the market started to wonder if maybe super Saturday was a dream – that the market hadn’t really picked up and that we were going to limp into Christmas much the same as last year.

Market improvement seems solid

By the last weekend of November, though, it was back on. Clearance rates were back up to 75%, Bidderman was up at 2, and there was no longer any doubt that the underlying improved market strength felt in October was still there. There was in fact a feeling of urgency out there, as if buyers suddenly realised that Christmas was just around the corner and that they had to act now if they wanted a home.

This sense of excitement even filtered through to the top end $3 million-plus market. After a dramatic increase in sales in this segment in October, by November the top end could officially be removed from life support. There were around 50 sales over $3 million in inner east and bayside, a very big month and a lot stronger finish than 2011.

Positive end to the year – especially in the inner east

Overall we feel the market in the inner east has finished very strongly and on a positive note for 2012. By the bay is a different story, more positive than 2011, but not as strong as the inner east.

After a year of a ups and downs then, we go into 2013 a lot more positive than we went into the market at the beginning of this year. What happens next year will depend a lot on what happens with interest rates and the economy, but having survived a few knocks and blows, overall the market feels like it has reached a stage of resilience this year and there’s reason to feel more optimistic for the market over the next twelve months – but hey who really knows, that’s what makes the Melbourne top end so interesting!

Mal James is principal of James Buyer Advocates, which advocates on behalf of buyers of property over $1 million. Mal writes weekly auction reports, advice and in-depth market analysis on James' website.